Apple will have to pay $368 million in damages to VirnetX.

A $368.2 million verdict against Apple has been upheld in the Eastern District of Texas, putting patent holding company VirnetX in a position to collect both royalties and damages from Apple if it continues to use its VPN and FaceTime technologies. Judge Leonard Davis ruled late Tuesday on Apple's request for either a reduction in the damages or a new trial, denying both requests and ordering the two companies to work out a licensing deal on VirnetX's patents.

The lawsuit began in 2010 when VirnetX filed suit against Apple, Cisco, and other companies over their respective VPN implementations (which included Apple's FaceTime tech in iOS and OS X). The suit waddled through the court system for more than two years until VirnetX won its $368.2 million judgment against Apple in late 2012. The firm then tried to ask the court for an injunction stopping Apple from continuing to use the technology.

The similar lawsuits against Cisco, et al are still ongoing and trials have been rescheduled for next month. VirnetX also secured a 2010 settlement from Microsoft over the same patents.

The court denied VirnetX's request for an injunction but upheld the damages as part of Wednesday's ruling, saying there was "substantial evidence" to support the damages. Judge Davis also ordered Apple to pay $330,211 per day (hat tip Seeking Alpha) to VirnetX until the royalty payments are sorted out between the two companies. They have 45 days to do so before the court makes another ruling.

As pointed out by our Tech Policy Editor Joe Mullin, the situation VirnetX has found itself in is practically a patent-holder's dream. Not only will the company receive millions in damages from Apple, it will also likely win ongoing royalties. This is almost as desirable a situation as if VirnetX had simply won an injunction—if VirnetX wins just one percent of royalties on the sale of iOS devices, it could make a ton of money. In fact, one percent isn't outside the realm of possibility—before Newegg was able to defeat Soverain Software's patents for the online "shopping cart," Soverain stood to rake in a one percent royalty payment from Avon and Victoria's Secret online sales thanks to the same federal court in the Eastern District of Texas.

Apple has not responded to our request for comment by publication time, but needless to say, VirnetX is happy with the decision. "We are extremely pleased with the Court's Order in our suit against Apple," VirnetX CEO Kendall Larsen said in a statement. "We look forward to negotiating a license with Apple that includes an ongoing royalty agreement."

This one is probably getting appealed. The pattern has been win in east texas, loose at the fifth circuit. New Egg lost in Texas and Won on appeal at the fifth circuit.... I think those judges have no respect for the judges in east Texas. This just gives apple a number. We can spend up to 367 million to kill these patents.

From a previous article on the subject, the patents in question essentially claim "Agile Network Protocol for Secure Communications with Assured System Availability" and "Method for Establishing Secure Communication Link Between Computers of Virtual Private Network."

This is the essence of how software patents are used today, to patent the basic idea and not the implementation. This should not stand since it covers any past present and future "method" of doing just that, VPN networks.

Can't there be some sort of law that says you have to act on a patent in a cetain amount of time for it to hold weight? Don't they have that in movies? Isn't that why you see re-releases of old movies all the time from the big companies so they can hold on to their copyrights?

Can't there be some sort of law that says you have to act on a patent in a cetain amount of time for it to hold weight? Don't they have that in movies? Isn't that why you see re-releases of old movies all the time from the big companies so they can hold on to their copyrights?

Can't there be some sort of law that says you have to act on a patent in a cetain amount of time for it to hold weight? Don't they have that in movies? Isn't that why you see re-releases of old movies all the time from the big companies so they can hold on to their copyrights?

Would that stifle innovation?

Depends on how long the time frame is and how you define "act upon".

Yeah - obviously it could be a huge problem. And of course companies would "act upon" in the worst ways possible. There just has to be something done, right?

I'm curious to know whether VirnetX is a legitimate tech company or yet another patent troll. I think the article should have clarified this.Based on some hasty googling it appears that they are in fact a troll and produce nothing significant in terms of technology/devices/software.

Can't there be some sort of law that says you have to act on a patent in a cetain amount of time for it to hold weight? Don't they have that in movies? Isn't that why you see re-releases of old movies all the time from the big companies so they can hold on to their copyrights?

Would that stifle innovation? I don't know.

That's now Copyright basically works (Defend it or lose it) and it leads to stupidity. Leaves them sending C&S stuff out to random small-time people doing fan work for stuff.

I was just thinking that perhaps not all these cases are merely about patent trolling. I'm sure there are companies who create a great software idea but instead of featuring in their own product to compete in an already established and hectic market, they approach other companies who already have an established market in which to sell and in effect license it through a partnership. A business model that is especially damaged when the software gets 'copied'. So it makes sense that not all these types of cases would be merely patent trolling, I have only surface knowledge of this case so have no idea if what I've said above applies here, and am not saying it does, only that it could.

Regardless of whether this is a patent-troll (as seems likely), it's hard to feel for Apple, given they are very good at playing the legal game themselves, and seem to adhere to the "The best defense is an attack" strategy in legal dealings.

It also wouldn't be the first time Apple has knowingly infringed on trademarks or patents, and hoped for the best.

Can't there be some sort of law that says you have to act on a patent in a cetain amount of time for it to hold weight? Don't they have that in movies? Isn't that why you see re-releases of old movies all the time from the big companies so they can hold on to their copyrights?

Would that stifle innovation? I don't know.

That's now Copyright basically works (Defend it or lose it) and it leads to stupidity. Leaves them sending C&S stuff out to random small-time people doing fan work for stuff.

Nathan Smart didn't say "defend" he said "act". As in, VirnetX would actually have to have a product on the market using their magical VPN technology in order to contest their issue with Apple/Cisco/Microsoft/etc.

Which they don't. Their website has a video, a terrible whitepaper, and info on how to license their idea (I won't call it a technology, because they don't have anything-- it is just an idea).

I have always liked this idea of forcing companies to actually produce a licensable product in order to uphold their patents. Even if you allow for a "warm up" grace period, which would give companies time to go from an idea to product, with a lengthy application process and a hefty fee to extend their time.

Of course you're right. Apple doesn't actually produce anything, so their entire value is embedded in these perverse uninventions and uninnovations known as software patents. I wonder how many lamprey will have to latch on to them before they're so drained they decide that the only way to fix the problem is to accept that what they actually do isn't as awesome and worthy of protection as they try to pretend it currently is.

You don't have to convince me, you have to convince Apple.

Nothing is expensive enough for Apple to try to eliminate software patents.

I was just thinking that perhaps not all these cases are merely about patent trolling. I'm sure there are companies who create a great software idea but instead of featuring in their own product to compete in an already established and hectic market, they approach other companies who already have an established market in which to sell and in effect license it through a partnership. A business model that is especially damaged when the software gets 'copied'. So it makes sense that not all these types of cases would be merely patent trolling, I have only surface knowledge of this case so have no idea if what I've said above applies here, and am not saying it does, only that it could.

VPN's have been used for a loooooong time in various forms so they patent an existing technology, and they patented the overall idea and not a specific implementation. I read a little on the patent and it might cover encrypted connections any way shape and form. They are patent trolls pure and simple.

From a previous article on the subject, the patents in question essentially claim "Agile Network Protocol for Secure Communications with Assured System Availability" and "Method for Establishing Secure Communication Link Between Computers of Virtual Private Network."

This is the essence of how software patents are used today, to patent the basic idea and not the implementation. This should not stand since it covers any past present and future "method" of doing just that, VPN networks.

I would argue that you shouldn't even be able to patent implementation of a basic idea -- especially if you give this basic idea to 10 software developers and they all independently come out with the same or similar implementation.

Which they don't. Their website has a video, a terrible whitepaper, and info on how to license their idea (I won't call it a technology, because they don't have anything-- it is just an idea).

I have always liked this idea of forcing companies to actually produce a licensable product in order to uphold their patents. Even if you allow for a "warm up" grace period, which would give companies time to go from an idea to product, with a lengthy application process and a hefty fee to extend their time.

The only problem I have with this notion, is that it prevents the usage of patents that I do at my current job. Basically, I patent a bunch of stuff to prevent other companies from charging money for the same thing. Then I contribute it to a standards body, and make the whole thing available.

If you are forced to "act" upon a patent, that would mean I would lose all my patents, because I don't sell a commercial product based on it, as I work in a lab environment. Rather, I create standards based on them, and give that away.

I was just thinking that perhaps not all these cases are merely about patent trolling. I'm sure there are companies who create a great software idea but instead of featuring in their own product to compete in an already established and hectic market, they approach other companies who already have an established market in which to sell and in effect license it through a partnership. A business model that is especially damaged when the software gets 'copied'. So it makes sense that not all these types of cases would be merely patent trolling, I have only surface knowledge of this case so have no idea if what I've said above applies here, and am not saying it does, only that it could.

VPN's have been used for a loooooong time in various forms so they patent an existing technology, and they patented the overall idea and not a specific implementation. I read a little on the patent and it might cover encrypted connections any way shape and form. They are patent trolls pure and simple.

Yeah, this patent is way too broad. WTF is a secure domain name anyways? Also, WTF is a secure computer address? I've heard the terms internal DNS and an internal network address, which gives way for the term internal domain name. I wonder if VirnetX can help relieve me of the "WTF?"s in my head, but then they would probably be replaced with "Seriously?"s all over.